A Chinese court has ruled that 'companies cannot be allowed to lay off employees and replace them with AI.'
A Chinese Intermediate People's Court ruled that a company's dismissal of workers and replacement with AI was illegal. The workers' lawyers argued that 'while companies can benefit from the efficiency improvements brought about by AI, they must also bear a corresponding social responsibility.'
Chinese court defends labor rights in new AI-replacement case | english.scio.gov.cn
Reasons for declining the “AI replacement” ability——Hangzhou Central Hospital Examination-New Hua
http://www.zj.xinhuanet.com/20260430/1f6a0708d647452fbe9a9f94a99f7421/c.html
Judiciary case law: AI replacement system, mobile operator independently supported “technological revolution” style
https://www.stcn.com/article/detail/3870681.html
In 2022, the plaintiff joined a technology company in Hangzhou as an AI quality assurance super advisor. His work involved ensuring the accuracy of AI model output, such as matching user inquiries with large-scale language models and filtering out illegal or privacy-violating content. He earned a monthly salary of 25,000 yuan (approximately 575,000 yen) for this job.
However, the man's job was later replaced by AI, and the company tried to move him to a lower-level position with a monthly salary of 15,000 yuan (approximately 345,000 yen). When the man refused, the company fired him, citing organizational restructuring and downsizing, and paid him approximately 310,000 yuan (approximately 7,139,000 yen) in compensation.
The man challenged the amount and sought better compensation through an arbitration board. The arbitration board ruled the dismissal illegal and supported the man's claim for additional compensation.
Dissatisfied with the arbitration outcome, the company filed a lawsuit with the Hangzhou District People's Court in August 2025, and subsequently appealed to the Hangzhou Intermediate People's Court.
The central issue in this case was whether the replacement of jobs by AI constitutes a 'significant change in objective circumstances' that could be grounds for contract termination under Chinese labor law. However, the Intermediate People's Court ruled that the reasons for dismissal cited by the company did not constitute such a 'significant change.' This is because this concept typically refers to significant events such as company relocation or mergers.
Furthermore, whether the parties negotiated fairly and communicated before the contract termination is an important factor in determining whether the company's termination of the contract constitutes unfair dismissal. In this case, however, the replacement position offered by the company involved a significant pay cut and was therefore deemed not to be a reasonable reassignment.
As a result, the Intermediate People's Court upheld the District People's Court's ruling and ordered the company to pay compensation.
The plaintiffs' lawyers stated, 'Replacement by AI does not automatically justify the termination of employment contracts.'
The rapid adoption of AI in China is raising concerns about unfair replacement of workers with AI. Wang Tianyu, a researcher at the Chinese Academy of Social Sciences, stated, 'Technological progress may be irreversible, but it cannot exist outside of the legal framework,' emphasizing that forward-thinking institutional design is necessary to protect the dignity and rights of workers.
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